Entertainment Industry Still Insisting That Gov't Protectionism Is The Only Way To Compete

from the oh-really? dept

A few months ago, we responded to an ill-informed opinion piece in the UK's Independent by Stephen Garrett, who runs a TV production house. In his essay, Garrett trotted out all the old falsehoods about how file sharing is the same as theft and that ISPs absolutely need to stop file sharing or the entertainment industry will die. On top of that, he relied on the tired old argument that file sharing "costs jobs" and those jobs are "needed" in these economic times. That's ridiculously laughable, of course. Inefficient industries and inefficient jobs (such as those supported by gov't monopolies) are exactly what's not needed these days. However, it appears that Garrett has not gotten the message (or, would simply beg for a gov't handout, rather than adjust his business model to match with the economic times).

Steven Hoy points out that the Financial Times is the latest UK paper to give Garrett space to put forth his opinions on the subject, and so we get yet another misguided rant about how the gov't and ISPs need to protect his own inability to craft a better business model.

Piracy (think Johnny Depp) and file-sharing sound harmless enough. But as it involves the widespread appropriation of intellectual property without payment, file-sharing is better described as file-nicking. It is theft. Hundreds of millions of pounds are haemorrhaging out of the film and TV industries, just in the UK. Jobs are being lost and companies will fold. This is not in contention.

Actually, it is very much in contention. It's almost pointless to reiterate this point, but if you can't understand the difference between someone making a copy and someone taking away a good, it's difficult to see how you should be given responsibility over running a business. It may be infringing, but it is not "theft." There is no "loss." Nothing is "missing." The only problem is a business model issue -- that is that you, Stephen Garrett, failed to give people a good enough reason to buy something. That's your fault, and your fault alone.

If any jobs are being lost, it's because you failed to manage your business properly, recognize the new market that technology has created, and learn to embrace it in a profitable manner. Others are doing so. You whine and ask the gov't for a handout.

In this parallel universe, consumer rights have acquired the status of a fascistic mantra. What the consumer wants, the consumer gets, even if he does not want to pay for it. Everyone has, to some extent, colluded in this fantasy, blocking out the advertisements while consuming -- for "free" -- newspapers, films, television shows and music on legitimate websites. Now, and this has happened very quickly, consumers assume they have a right to these things. Free, and forever. Unfortunately this fantasy is unsustainable.

Why is it unsustainable? It is, in fact, no different than any marketplace where competition exists. Let's say, for example, that you're a pizza maker, and it costs you $5 to make a pie, which you then sell for $10. Not a bad business. Now, a competitor comes along, and figures out how to make pizza pies for $3, and start selling his (which are just as good as yours) for $5. Now, you're in trouble. What do you do? Normally, you figure out how to compete, or you go out of business. You don't go crying to the gov't about how you're going to lose jobs if the gov't doesn't stop others from making the cheaper pizza. You come up with a better pizza or a more efficient way of making the pizza and you compete and get people to buy your pizza.

Economically speaking, this is the identical situation, because all that matters to a business is the margin. The fact that new technology has made it possible for your content to have a marginal cost of $0 is the same thing as someone figuring out how to make a pizza and price it at your marginal cost. It's just competition, and the answer is that you learn to compete, not that you blame the more efficient system or anyone who enables it.

All of these cost money to produce; in the case of TV dramas such as Spooks that my company produces, a huge amount. At the point when these creative products enter cyberspace, they are only partly paid for. Producers are dependent on revenues from DVDs and international sales, which piracy hits.

Of course all of these things cost money to produce. No one has said otherwise. But that's why you put in place a better business model that offers something unique that they can't get elsewhere for free. You use those unique scarcities to make a profit and recoup your fixed costs. That's just business. No gov't protectionism needed.

Piracy happens on the internet. The greater the bandwidth, the easier piracy is. We in the creative industries have asked (nicely) that the internet service providers should help tackle piracy by responding in a graduated way to customers of theirs identified as offering or downloading pirated material. The sequence would be along the lines of a warning letter, a "squeezing" of bandwidth, a further cut in bandwidth and then the ultimate sanction: a limitation of service.

I read that logic to be the same as "automobiles happen on roads, the nicer the roads, the more automobiles we have. We in the horse carriage industries have asked (nicely) that the road builders should help tackle automobile dangers by responding in a graduated way to drivers identified as speeding at rates beyond what a horse carriage can run. The sequence would be along the lines of a warning letter, a fine for speeding, a further ban from driving on roads, and then the ultimate sanction: a limitation on driving altogether."

Stopping progress because you're unable to adapt is no excuse.

Having the right to use the internet to access entertainment brings with it the responsibility not to act in a way that endangers every future film, TV show and music track. In particular, the UK government needs to use Tuesday's Digital Britain report to compel ISPs to work with us on a graduated system of penalties for file-sharers. Doing nothing bolsters the notion that nothing has value. The logical outcome is that, within our lifetimes, there will be nothing of value left.

No, Mr. Garrett. What you are asking for is for the internet to change to adapt to the way you liked to run your business. But that's not how the world works. Your unwillingness (or, perhaps, inability) to change is your problem, not the internet's. The internet was designed as a communications medium. You are trying to force it into being a broadcast medium, because that's the only business model you know, and you're unwilling (or unable) to learn how to create a business model on a communications platform. The only ones who should be "sanctioned" or face penalties is you, for your own inability to compete.

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Fashion Designers Realizing New Fashion Copyright Would Cause Serious Harm To Business

from the waking-up dept

For many, many years, we've pointed out how the fashion industry is an example of a highly creative industry that has thrived without the use of copyright. The industry itself is massively successful, incredibly innovative, and involves plenty of competition. This should be seen as a good thing. Yet, some big name designers, who were annoyed that they had to keep competing by releasing new designs all the time have been lobbying Congress to pass a new law that would institute a special copyright for fashion design. This makes little sense. The entire purpose of copyright is to encourage innovation. Yet, if the industry is thriving, competitive and innovative, why would you ever want to introduce new copyright?

Yet, as expected, there has been a big push to get the law passed this year. People have been submitting stories on a near weekly basis about how one or another celebrity designer trekked up to Capitol Hill to push starstruck Congress Critters to support the bill.

It's reached the point that many expect the bill to finally pass this year, but suddenly many in the industry are realizing what a disaster this would be. Boing Boing points us to a plea from industry insiders who are realizing how such a law would destroy the industry and force many small businesses and designers to shut down. Yet, when they talked to their Congressional reps, they were told that Congress hadn't heard anyone complain about this yet, so now they're trying to get out the word.

It might help them to present some of the economic research on this, including the studies that have shown how much the lack of copyright has helped the industry to thrive, and how much harm the addition of copyright would do to the overall industry. This research has been out there for years, but apparently the folks writing the laws would rather hang out with celebrities like Tim Gunn than actually do some research around what such a law would really mean for the industry.

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No Surprise: UK Film And TV Execs Insist They Need Gov't Help Or They'll Disappear

from the sigh dept

Pretty much any industry is going to use any opportunity to ask for more help from the government, so it should come as little surprise that film and TV execs in the UK are claiming that they need more help from the government in fighting piracy or they will "fade into insignificance in five years." Of course, if you look back at the history of the entertainment industry, they've basically been claiming this as far back as you can look and there's zero evidence to support this. Yes, it may be true that if they do not adjust their own business models, these laggard companies may disappear, but it hardly means the end of video entertainment production. Others will step into the void, embracing newer and better business models. But, of course, you won't hear that. Instead, the government will rush in to help and protect, and the end result will be that it actually harms the newer more innovative and efficient producers of content in favor of the inefficient legacy companies. It harms overall society, but politicians never seem to take that into account.

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Great Moments In AP Protectionism: Demands Takedown Of Videos It Purposely Shared With Affiliate

from the brilliant-work dept

A bunch of folks are submitting the latest and greatest in the Associated Press's attempt to become the RIAA of news. The AP, smartly, has a YouTube channel, where it puts up a bunch of AP videos, with the embed code enabled. An AP affiliate in Tennessee reasonably embedded some of those videos... and were promptly accused of "stealing" the AP's licensed content and ordered to take it down. There are so many things wrong with this situation it's difficult to know where to start:

• It's the AP's own YouTube channel.
• This radio station is an AP affiliate.
• The AP turned on the embedding function
• When told all of this, the AP exec demanding the takedown had no idea it had a YouTube channel.

This is clearly part the right hand not knowing what the left hand is doing... but it's also a sign of how out of touch the AP remains. When it purposely offers up content for sharing, it did something smart. Demanding that anyone take down content that was specifically designed to be shared in this manner is just amazing.

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Software Industry Slams Digital Britain Report For Protecting Music Industry Interests

from the and-not-software-industry-interests-as-well dept

At first, this sounded like a good thing: a software industry group slammed the Digital Britain report that came out recently for basically caving to recording industry interests, noting that it was just that industry using its lobbying power to try to prop up a failed business model. Indeed! Except... then you look at the details and it's not as impressive. The software group is the Federation Against Software Theft and Investors in Software (FAST IiS), which should already have you scratching your head... and then the details show that basically they're not upset about propping up a failed business model, they just wish it also propped up their own failed business model:

"All digital content is equal before the law and so too should be all digital industries. A piecemeal approach will confuse digital consumers, both the public and businesses, will muddy the legal framework and will therefore ultimately impede Britain's success in the new digital economy of the twenty-first century."

Yes, it's awful that the plan basically tries to prop up one industry -- but why should it need to prop up two industries with failed business models?

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A Love Of Competition, Not Protectionism

from the culturally-difficult dept

There's an interesting dichotomy that goes on in captialist societies. We all know that markets grow and innovation occurs through competition and the ongoing process of companies trying to out-innovate each other -- but each individual organization is always looking to monopolize its own world. In fact, that is what innovation is all about. You innovate to get a monopoly on whatever that innovation is, for as long as you have it. The problem, however, is that too many have build up the belief that these monopolies should be lasting, or even permanent. That's not true. For the health of society and the company, they absolutely should be fleeting monopolies. That's the only way to make sure a company changes with the times and is flexible enough to handle market changes. But that quixotic and dangerous pursuit of permanent monopolies leads to dangerous situations -- often using or demanding protectionist policies from gov't regulators.

Eliot Spitzer (yes, that Eliot Spitzer) makes some interesting points in a column where he attacks both the SEC and GM for focusing on protectionism rather than competition. When it comes to GM, the argument is easy to understand. GM has done much to try to resist novel and useful innovations in the interest of protecting its own business. As for the SEC, that's a bit more of a stretch -- and obviously stems from Spitzer's own efforts back when he was NY's Attorney General and attempted to take on Wall St. while the SEC resisted any such investigations and lawsuits. Thus, to him, he represented "competition" and the SEC tried to block out such competition (which brings up some weird questions concerning whether or not it's good to have competition within the regulatory structure).

But the key point Spitzer makes is that we need to build a "culture of competition" into American organizations, rather than protectionism. That sounds good, but I'm having trouble seeing how you could actually make that work directly. There are some things you can do on the margins -- and, in fact, research has shown that making noncompete agreements unenforceable actually does increase competition (is it worth pointing out at this time that noncompetes went from unenforceable to enforceable in Detroit in the 80s...?). But, you can only do things like this at the margin. There is no way to flat out change a culture in this manner. Instead, I think you actually need to create incentives for companies to take a longer term view, rather than the short term view we get today. With the quarterly report set up, everyone has a 3-month time horizon on pretty much everything they do (in some cases one year, but never more). If companies actually had incentives to look at the significantly longer term, they would recognize themselves that ongoing competition and innovation are the only way they're going to continue successfully serving a market in the long run. But until someone comes up with a way to create incentives that allow for both transparency and longer term views, then it's likely that companies will focus on beating down competitors rather than winning through innovation.

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Entertainment Protectionism Doesn't Create Jobs, It Destroys Them

from the welcome-to-econ-101 dept

Reader Darren sent in a link to an "opinion" piece in the UK's Independent by Stephen Garrett, a managing director of a TV production house that apparently makes some popular UK TV shows (he names Spooks, with which I am personally unfamiliar). The article is basically no different than any of the thousands of poorly thought out and badly argued demands from entertainment industry execs for government protectionism in the face of the giant "internet threat." Garrett goes through all of these mistakes pretty early on: comparing file sharing to the theft of physical property, twisting basic logic around to suggest that ISPs bear the responsibility of stopping file sharing (rather than, say, the entertainment companies learning to adjust their business model in the face of a changing marketplace), and playing the old and easily debunked ripple effects card in discussing the "damages" done.

But rather than going through those same old tired arguments again, this seemed like a good opportunity to take on a later argument he makes, which I've heard from others as well:

At a time of economic downturn, saving jobs and securing economic activity is more important than ever. Investment in new forms of bringing entertainment to the public depends on legitimate sales of material, whilst lost opportunities of innovation is the tab picked up by those who do pay for content for those who refuse to do so.

This, like Garrett's earlier points, shows a fundamental misunderstanding of economics. Saving jobs and securing activity is not more important than ever if those jobs and that economic activity are inefficient, unnecessary or hinder other important economic activity from taking place. Historically, almost every example of government protectionism has been to protect exactly those types of jobs and economic activity, and the end result is disastrous. Rather than adapting to changes in the market, the protected industry holds onto the past, while those industries in other countries adapt, evolve and improve. In the end, the "protected" industry simply can't compete, the jobs are lost anyway, and it's much more difficult for the new industry in those countries to grow and catch up to foreign competitors.

Garrett's suggestion of special protectionism in the entertainment industry in the UK is exactly the wrong solution for the industry and would lead to many more problems down the road. I would hope that people in the government in charge of deciding this stuff would understand this -- but so far, the UK's Culture Secretary has shown himself to have difficulty grasping some basic economic realities, so don't be surprised to see him buy into this sort of argument.

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Bus Company Tries To Shut Down Online Carpooling Service

from the why,-that's-illegal! dept

Carpooling is exactly the sort of thing that is perfect for a web app -- to match up potential drivers and riders -- but apparently it makes bus companies upset. A Canadian bus company has actually gone so far to try to shut down an online carpool matching service, claiming that it's illegal. The bus company actually had someone go and test out the carpool service, and has now asked the local transportation board in Ottawa to shut down the service. Their argument is that these carpools are unregulated, and the drivers are not licensed and don't have to follow the same regulations that bus and taxi services do. Perhaps that's a reason to re-examine the regulations rather than shutting down the carpooling service, though.

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Repair A Computer In Texas Without A License And Face A Year In Jail

from the ridiculous-laws dept

Here's a bizarre one sent in by Syborg1404. It turns out that it's against the law in Texas to repair a computer without a private investigator's license. Specifically, the law requires anyone who is repairing a customer's computer by analyzing data on the computer to have a private eye's license -- which only takes three years as an apprentice or to earn a criminal justice degree. This isn't just an out-of-date law still on the books either. It was passed last year, though it's now being contested as unconstitutional. While it does not appear that anyone's been charged under the law, computer repair technicians used to cleaning spyware and viruses off of computers in Texas are reasonably worried.

To be honest, this whole thing sounds like garden variety protectionism, similar to state laws that required people selling goods on eBay to spend a year or more to get an auctioneer's license. These laws aren't about protecting consumers, but about limiting the number of competitors in the market itself. Hopefully Texas gets rid of it before someone is fined and tossed in jail for cleaning spyware out of someone's computer.

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China Shows Again That Stronger IP Protection Comes After There's Content To Protect, Not Before

from the funny-how-that-works dept

Copyright and patent law is supposed to act as incentives for the creation of new content or inventions. Yet, as we've pointed out recently, there's little economic evidence that it does so. Instead, the evidence suggests that stronger intellectual property laws seem to come after the fact. In other words, when there is little IP protection, there is often quite a bit of creation and invention -- and then those that did that creation and invention decide that they want to protect it retrospectively. That's not the purpose of IP law, but it's what seems to happen. And, look no further than China to see it happening again. China, of course, is notorious as a haven for intellectual property infringement, which (not surprisingly) has resulted in business model innovation. However, now that China is hosting the Olympics, it's suddenly worried about making sure the video of the games will not be copied in an unauthorized manner (found via Against Monopoly). Note the obvious irony. You can walk around malls in parts of China and buy any kind of unauthorized software, music and movies for next to nothing... but when it comes to China's own content, suddenly copyright is a big deal. And, of course, it wasn't copyright that acted as the incentive for China to host and show the Olympics -- but now the country is using it to protect the content. Copyright is being used for protectionism, not as an incentive.

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